Compromise gets results

The strategy: To work out what the new financial advice reforms mean for me.

Are these the ones the politicians and media have been banging on about for ages? That's them. They were finally passed by Parliament last week, albeit with some pretty significant concessions to the financial planning industry. One of these was that the original start date of July this year has been pushed back. Compliance with the reforms will be voluntary for the first year, meaning planners won't have to comply until July 1, 2013. Some planners have indicated they will comply earlier and the Financial Planning Association will be introducing its own ban on commissions this year but don't expect all planners to be implementing all of the reforms until they have to.

So what are the reforms? There's a forest of legislation but in a nutshell the reforms will require planners to act in the best interest of their clients; ban commissions and other forms of conflicted remuneration; require better fee disclosure by planners; ban the charging of percentage-based fees on geared investments; allow planners to provide simpler, limited advice where consumers don't want a full financial plan; give the Australian Securities and Investments Commission greater powers to act against rogue advisers; and require planners to ask their clients whether they're happy to continue paying for their services if they don't qualify for an exemption.

The intention was to ensure financial planners focused on their customers rather than selling product, which can't be a bad thing.

The concessions granted to get the bill through revolved largely around opt-in. While the planners didn't succeed with their demands to get opt-in abolished (though they did manage to convince the Coalition, which has said it will get rid of it if elected), they did manage to secure a compromise. Planners who sign up to a code of conduct approved by ASIC will not have to comply with this requirement.

What does that mean? It's a good question. The Financial Services Minister, Bill Shorten, says the code would need to obviate the need for opt-in to be approved - such as requiring financial planners to provide ongoing service if they charge ongoing fees.

''This is not a loophole to opt-in,'' Shorten told Parliament. ''If ASIC is not satisfied that a professional code obviates the need for opt-in, those advisers signed up to that code will need to comply with opt-in requirements.''

The amendments also softened the disclosure requirements so that planners will not be called on to reveal future fees and charges. The chief executive of the Financial Planning Association, Mark Rantall, says an explanatory memorandum will provide more detail. He says the government has also agreed to restrict the term ''financial planner'' to advisers who are appropriately qualified and experienced, though separate legislation will be needed for this.

This should at least ensure ''advisers'' with just a couple of weeks' training won't be able to tout that they are providing a professional service.

When will I benefit from the reforms? That's another good question.

If your adviser is a member of the Financial Planning Association, he or she should introduce some measures this year. But many of the reforms apply to prospective clients only, which means if you already have an adviser, your relationship with him or her will be specifically excluded.

Under both the industry's reforms and the government's, for example, the ban on commissions will apply only to new investments - and opt-in (what remains of it) will apply only to new clients. Consumer group Choice says existing clients may well have to switch advisers if they want to reap the full benefit of these reforms. If you're happy with your existing planner, it would still be worth asking that you receive the same treatment as their new clients.